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Saturday, 17 November 2012 06:49
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Government needs to release its huge foodgrain stocks

While governments, in the past, have been quick to blame hoarders for rising food prices, it’s important to note the biggest hoarder appears to be the government itself. As compared to the 212 lakh tonnes that the government is supposed to be carrying by way of a buffer stock as well as a strategic reserve of both rice and wheat in October—the figure varies from season to season and rises to a high of 319 lakh tonnes on July 1—the government’s stock position is several times this. On July 1, its rice and wheat stocks were 806 lakh tonnes and this fell to 666 lakh tonnes in October.

Apart from the fact that such large stocks add to carrying costs, and therefore subsidies, for the government, there are implications as far as inflation is concerned. While WPI inflation for food articles has come down from 10.63% in May to 6.62% in October, this hides the large inflation in rice and wheat. For rice, WPI inflation rose from 4.89% in May to 7.46% in June, all the way up to 12.41% in September before moderating a bit to 11.40% in October. For wheat, WPI inflation rose from 6.75% in May to 19.78% in October (with just a minor dip in July). Not surprisingly, then, that an agriculture expert like Ashok Gulati who heads the Commission for Agriculture Costs and Prices is on record saying that the government stock needs to be in the markets, not in FCI godowns. A point reiterated by Planning Commission member Abhijit Sen, when he says that in the case of rice and wheat it is government stocking that is the main problem. Add to this the inflationary impact of rising MSPs and programmes like MGNREGA, and it appears the government is responsible for a large part of India’s inflation problem.


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